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  • Low and middle income earner tax offsets

    If you are an Australian resident for income tax purposes and you pay tax on your taxable income, you may be eligible for both the:

    • low income tax offset
    • low and middle income tax offset.

    You don't need to complete a section in your tax return to get these tax offsets. We work out your tax offset for you once you lodge your tax return. If you are entitled to any offset, it is added to your tax return and you can see the amount on your notice of assessment (you won't receive the offset as a separate payment).

    On this page:

    What is a tax offset?

    A tax offset means you pay less tax (also known as your tax payable) on your taxable income (that is, your total income minus any deductions).

    This tax offset can only reduce the tax you pay to zero, but any unused offset amount can't be refunded to you.

    How tax offsets affect the tax you pay

    The tax offset amount you receive depends on your taxable income and the amount of tax you need to pay on this income (your tax payable).

    Non-refundable tax offsets such as the low and low and middle income tax offsets can only lower your tax payable to zero.

    Offsets also can't reduce your Medicare levy and Medicare Levy Surcharge (if any). The Medicare levy is 2% of your taxable income, in addition to the tax you pay on your taxable income.

    So, if your taxable income is $18,200 or less and you:

    • have not paid any tax, an offset can't reduce the tax you pay– your tax payable amount is already zero
    • have paid any tax on this income, you will generally receive all of this tax back as a refund – your tax payable amount is zero so no offset can be applied.

    If your taxable income is $18,201 or more, we use your taxable income to work out how much tax you're required to pay. We then reduce the tax you need to pay with the offset amount you're entitled to.

    If you are under 18 as at 30 June of the income year and you have unearned income, these offsets can't reduce the tax payable on this income.

    Claiming the low and low and middle income tax offsets

    You don't need to complete anything in your tax return in order for us to work out your low or low and middle income tax offset. We work out the amount of this tax offset for you once you lodge your tax return.

    Any offset you are entitled to is included when we work out the result of your tax return.

    If you want to find out how much of an offset you were entitled to, you can see this amount on your notice of assessment. Look for the Less non-refundable tax offsets section.

    If you lodge online, your notice of assessment will be sent to your myGov Inbox once you return has been finalised.

    If you receive a tax refund it will be deposited into your nominated bank account. Any refund may also be reduced by any debt you have with us or any Australian government agency, the law requires us to use refunds or credits to pay debt.

    Low income tax offset

    The maximum low income tax offset is $445.

    If your taxable income is:

    • less than $66,667, you will get some or all of the low income tax offset
    • $37,000 or less you will get the full offset of $445.

    The low income offset amount is reduced by 1.5 cents for each dollar over $37,000.

    Low and middle income tax offset

    The low and middle income tax offset amount is between $255 and $1,080.

    The full offset is $1,080 per annum but you might not be entitled to the full $1,080. The base amount is $255 per annum.

    This offset is available for the 2018–19, 2019–20, 2020–21 and 2021–22 income years.

    If your taxable income is between $37,001 and $126,000, you will get some or all of the low and middle income tax offset. This is in addition to the low income tax offset.

    The amount of offset you receive depends on your circumstances, such as your taxable income and how much tax you have paid.

    The table and graph below shows the amount of the offset you are entitled to depending on your taxable income.

    Low and middle income tax offset

    Taxable income

    Offset

    $37,000 or less

    $255

    Between $37,001 and $48,000

    $255 plus 7.5 cents for every dollar above $37,000, up to a maximum of $1,080

    Between $48,001 and $90,000

    $1,080

    Between $90,001 and $126,000

    $1,080 minus 3 cents for every dollar of the amount above $90,000

    The graph shows the amount of the offset you are entitled to depending on your taxable income

    Example – income up to $37,000

    Jacqueline's taxable income is $18,000. She paid no tax because her income is under the tax-free threshold.

    As Jacqueline's income was less than $37,000, she is eligible to a low and middle income tax offset amount of $255. She is also eligible to a low income tax offset amount of $445.

    Jacqueline is eligible for the two offsets but as she did not pay any tax. Her tax payable can't be reduced any lower than $0.

    The low and middle income tax offset and low income tax offset are non-refundable tax offsets so the unused offset can't be refunded. Jacqueline's tax payable remains at $0 and she does not receive a tax refund.

    End of example

     

    Example – income exceeds $37,000 but is not more than $48,000

    Jeff's taxable income is $45,000. He is eligible for both the low income tax offset and the middle and low income tax offset.

    As Jeff's income is less $66,667 but above $37,000, he is eligible to a low income tax offset amount of $445 minus 1.5 cents for every dollar his income is above $37,000. That is:

    $45,000 − $37,000 = $8,000

    $8,000 × $0.015 = $120

    $445 − $120 = $325

    As Jeff's income is between $30,000 and $48,000, he is eligible to a low and middle income tax offset amount of $255 plus 7.5 cents for every dollar his income is above $37,000.That is:

    $45,000 − $37,000 = $8,000

    $0.075 × $8,000 = $600

    $255 + $600 = $855

    Both of the offset amounts reduce Jeff's tax payable.

    $325 + $855 = $1,180

    Jeff's tax payable can be reduced by up to $1,180 using the low income tax offset and low and middle income tax offset.

    End of example

     

    Example – income exceeds $48,000 but is not more than $90,000

    Anita's taxable income is $70,000. As Anita's income is more than $48,000 but less than $90,000, she is eligible to a low and middle income tax offset of $1,080. Anita is not eligible for the low income tax offset as her income is above $66,667.

    Anita's tax payable can be reduced by up to $1,080 using the low and middle income tax offset.

    End of example

     

    Example – income exceeds $90,000 but is not more than $126,000

    Andre's taxable income is $92,000. Andre's income is more than $90,000 but less than $126,000. He is eligible to a low and middle income tax offset amount of $1,080 minus 3 cents for every dollar his income is above $90,000. That is:

    $92,000 − $90,000 = $2,000

    $0.03 × $2,000 = $60

    $1,080 − $60 = $1,020

    Andre's tax payable can be reduced by up to $1,020 using the low and middle income tax offset.

    Andre was not eligible for the low income tax offset.

    End of example

    See also:

    Last modified: 15 Jun 2020QC 31944